beyondbrics

New World Resources, the London-listed Czech coal miner, reported a 44 per cent fall in annual profits – underperforming market expectations – as the company grappled with cooling demand for coking coal, one of the consequences of the slowdown in western Europe.

NWR reported a 2011 profit of €130m ($173m) compared to €233m for 2010. Revenues were up by 3 per cent to €1.6bn. Production of 11.2m tonnes was down by 2 per cent.

“I thought the numbers were pretty good in a pretty challenging environment,” Mike Salamon, the company’s executive chairman, said in a telephone interview. “Coking coal came off in our area due to eurozone concerns.”

NWR is a big supplier of coking coal to central European steel producers and was hurt by a fall in coking coal production due to slacker demand for steel. The coking side of the business posted an overall loss for the year.

However, the company did better with thermal coal, used for heating and power generation, which is expected to account for 52 per cent of sales this year.

Salamon predicted continued strong demand for thermal coal, thanks in part to the German government’s decision to scrap its nuclear power programme, which is putting coal-fired plants back on the agenda.

According to a report from Citi Investment: “… we are focussing on 2012 and beyond and how the company plans to tackle its biggest challenge – maintaining and increasing its coking coal volumes. The company has re-evaluated its longer-term plans and now expects over the medium term (next 2-3 years) to increase coking coals volumes to over 50 per cent of the sales mix, whereas previously it had guided to a return to historical levels of closer to 60 per cent. The company notes that a return to this higher historical product mix will depend on the success of underground development works and favourable mining conditions.”

Salamon said that he was generally optimistic that car production in the Czech Republic and Slovakia would continue to do well in 2012, spurring steel demand.

NWR mines mainly older and deeper Czech mines, raising issues of both cost and safety. Last year it broke ground on a new Polish mine called Debiensko, which is expected to go into production in 2017. The mine has estimated reserves of 190m tonnes of hard coal.

Despite results that analysts called “disappointing”, NWR’s share price rose by 0.88 per cent to 518.5p on the LSE, and increased by 2.27 per cent to Kc153.50 on the Prague Stock Exchange.

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